One of the biggest questions for the hospitality industry has been whether Congress will reauthorize pandemic unemployment compensation — namely, those $600 weekly checks that have been keeping out-of-work Americans afloat during the steepest economic downturn since the Great Depression. The policy is vital to COVID-19-battered New York City, where bars and restaurants remain limited to takeout or delivery, and where social- distancing mandates will prompt those institutions to operate with fewer staffers when they reopen this summer.
Millions of workers — many of them waiters, bartenders, and cooks without emergency savings — will still be out of a job when the government stops the payments on July 31. And scores of restaurant patrons who remain employed but who’ve seen their hours slashed — like gig workers and media professionals — will depend on the program to keep their salaries whole. House Speaker Nancy Pelosi already passed a bill extending the benefit through January 2021, but Senate Republicans oppose the measure. And just last week, White House economic director Larry Kudlow said the payments “may well stop” in July, claiming that they act as a disincentive to returning to work.
That is an incredibly stupid argument. The TL;DR is that withholding aid from countless hospitality workers will have more devastating repercussions than dealing with any so-called incentive issues. That’s especially true as many of those staffers won’t be able to get by on austere state benefits — particularly minimum wage employees living in zip codes hit hard by the virus. And any drop in consumer spending caused by eliminating these payments, tight social distancing requirements, could further wreak havoc on hospitality jobs later this summer.
Accordingly, here’s why reauthorizing the pandemic assistance program is so essential.
Regular unemployment payments aren’t enough, especially when jobless numbers are absolute trash
Perhaps a moderately rich guy like Larry Kudlow didn’t get the memo on how absurdly low state unemployment payouts are. In New York, the benefit only pays out half of one’s regular wages, up to $509 each week. So a waiter making the city average of $39,710 annually would only qualify for $1,524 per month. That sum likely wouldn’t even cover rent, never mind food or transportation. In regular times, that waiter might make ends meet for a few weeks before finding another restaurant, but right now, there simply aren’t enough jobs. That’s why the extra pandemic payments are so important; they let people survive for an extended period without begging families, friends, or landlords for relief.
How many will need help? A lot. Over 21 million Americans remain officially unemployed, though the true number is well over 30 million as the labor department doesn’t count the 9 million who want a job but who haven’t been actively looking for work. The nonpartisan Congressional Budget Office sees the jobless rate approaching 16 percent in the third-quarter, which is worse than during any single month of the Great Recession. Black unemployment has already reached 16.5 percent, with the Latinx rate closing in on a ghastly 18 percent.
Things are even worse in hospitality, with an unemployment rate of over 32 percent. And it doesn’t help that state labor departments are coping with massive backlogs in claims, causing those who are filing to rack up debt as they wait for payouts.
All these numbers could improve as cities, including New York, gradually reopen, but they’ll still stay at painfully high levels as social distancing guidelines force capacity cuts. More jobs could also be lost as consumers stay home for fear of catching or spreading COVID-19. A second wave of infections has already prompted Oregon and Utah to pause reopenings, and venues in Texas are re-closing as the virus spreads. In other words, those who have hospitality jobs right now might lose them later in August — after the enhanced payments expire.
You don’t get — or even approach — crushing unemployment numbers like these because government benefits disincentivize people from working. You get those generational numbers because the hospitality industry essentially got smashed by a giant meteor, and is continually being pummeled by tinier but equally deadly meteors. And when that epic Michael Bay asteroid shower puts so many out of work, it becomes not just a small-scale philanthropic problem of helping people out, but a larger economic and humanitarian disaster that could cascade throughout the country as landlords, banks, and retailers sustain their own successive shocks.
Fast food workers and other poorly-paid staffers will need enhanced employment to survive
Workers across the income spectrum will benefit from the $600 payments, but for fast food employees and other staffers making the minimum wage — or just above it — the extra payments could mean the difference between earning a livable wage and falling into inescapable poverty.
Let’s say an ex-fast food worker in New York earned the minimum wage of $15 per hour before being laid off, or $2,400 every month. Right now, the pandemic program and local unemployment will pay those workers $3,128, a nice little temporary raise. Unfortunately, the same worker would earn just $1,200 monthly when the supplemental benefits expire in July. Those discrepancies are magnified in places like Dallas, where a fast food worker would earn $3,004 per month while out of work — but just $600 on regular state unemployment, thanks to the local $7.25 minimum wage. Imagine having to subsist on $600 in Dallas, where the living wage is nearly three times that amount.
The pandemic payments, viewed through this lens, aren’t so much a disincentive as something that hammers home the realities of a capitalist system perpetually working against them. Those benefits reaffirm the fact that billion dollar chains are almost criminally under-compensating workers being exposed to the virus. Those benefits highlight how fast food companies pay lip service to Black Lives Matter through slick social media campaigns, while keeping its heavily BIPOC workforce impoverished by denying sick leave or failing to pay overtime.
Indeed, those pandemic benefits do precisely what they should, which is to tell fast food workers that their lives are literally more valuable than their labor, that they’ll earn more at home while protecting themselves instead of sacrificing their bodies to flood communities with cheap calories — at least until they’re called back to work. Many were likely never laid off at all. This is the selective service of our era, run by corporations. People will die. But just maybe, the longer those benefits last, they might even give those workers just a bit of bargaining power to demand that their regular pay match their unemployment pay.
The pandemic payments should help with consumer spending, particularly at higher-end venues
A $15 margarita or a $100 prime rib steak might seem all the more absurd now than ever. And one wonders whether dropping bank on an omakase is a realistic use of funds for an advertising executive with no prospects for returning to their job. But inasmuch as more and more folks will eventually go back to work at restaurants — hopefully not until it’s safe — it would help if diners were financially primed to eat out. Pandemic payments, particularly for higher earners who use them to replenish pay cuts, should help in this regard.
It’s unclear, of course, how much these payments will improve restaurant traffic, especially as more workers choose to save their money, as capacity cuts put a tight limit on occupancy, and as urban dwellers acquaint themselves with home cooking as the shutdown drags on.
But the checks were certainly key in boosting the type of disposable income — which rose 12.9 percent in April despite historic job losses — that splurge-worthy venues rely on. Without pandemic payments, many of the gourmands taking pay cuts, and whose spending helps drive the middle-class worker salaries at tonier establishments, won’t have that money to spend.
Unemployment benefits are currently the best way to target aid
Kudlow has suggested a return-to-work bonus as an alternative to the pandemic assistance, but hasn’t offered any details save the fact that it won’t be as large as the $600 payments. That brings us back to the quandary of how unfair a stimulus can be if it leaves out the people who can’t find work through no fault of their own.
The White House position notwithstanding, a deal might still be possible, CNN reports, citing a Goldman Sachs statement that it will be “politically challenging” to let the benefit lapse entirely. The investment bank believes Congress, as a compromise, will cut the benefit down to $300 through the year’s end, a sum that would still guarantee $1,200 monthly payments for beneficiaries.
And yet, there’s something particularly odious about the fact that Senate Republicans don’t plan to begin negotiations until July, mere weeks before the expiration of that benefit. There’s also something quite revealing about the nature of Kudlow’s criticisms in the first place. He’s not arguing that the federal government lacks the funds to help people, he’s worried about how the so-called disincentive might encourage people to stay at home and safeguard themselves amid a pandemic that has killed nearly half a million globally.